EUROPEAN EQUITY UPDATE: Hawkish repricing rocks stocks

Analysis details (09:32)

European equities (Eurostoxx 50 -0.7%) trade on the backfoot after extending on opening losses as global equity markets continue to digest ongoing hawkish mon pol repricing following yesterday’s strong PMI data. Market pricing for the ECB and BoE has moved in a more aggressive direction with the likes of Deutsche Bank now pencilling in an ECB terminal rate of 3.75% vs. prev. view of 3.25%. The handover from the APAC region was also a downbeat one as stocks succumbed to the selling pressure yesterday on Wall Street. US equity futures have found some stability after Tuesday’s slide, with the E-Mini S&P 500 managing to hold above the psychological 4,000 mark (despite briefly dipping below the level). Yesterday’s solid PMI data pushed up market-implied expectations of the Fed terminal rate, which is currently seen at 5.35%, a shade beneath the midpoint of the 5.25-5.50% target range (recall, its recent projections, which will be updated in March, pencilled in the terminal at 5.1%). The FOMC’s February meeting minutes will be released later today, and traders will be looking for clues on how much appetite there was at the meeting for a 50bps rate hike (recall, it lifted rates by 25bps at the meeting). Returning to Europe where sectors are lower across the board with the exception of Media which is garnering some support from post-earnings gains in Wolters Kluwer (+3%). To the downside, Basic Resource names are lagging, in-fitting with price action in underlying commodity prices and following earnings from Rio Tinto (-2.2%) which saw the Co. cut its dividend. Elsewhere on the earnings front, Lloyds (-2.4%) trades on the backfoot with a GBP 2bln buyback announcement overshadowed by softer-than-expected profits. Stellantis (+2.0%) is the best performing stocks in the CAC and FTSE MIB following solid earnings and a EUR 1.5bln buyback, whilst Danone (+1.5%) is another outperformer in France after FY results exceeded expectations. Finally, Fresenius SE (-5.5%) and Fresenius Medical (+9%) sit at opposite ends of the Stoxx 600 following results with the former vowing to simplify the group’s structure.

22 Feb 2023 - 09:32- Research Sheet- Source: Newsquawk